Announcement of Senegal to Receive Thirty Million US Dollars Loan from the World Bank and Thirty Million US Dollars from IDA for Structural Adjustment on December 22, 1980

·FOR IMMEDIATE RELEASE •World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A • TelephonE: (202; 477-n34 BANK NEWS RELEASE N0.81/39 December 22, 1980 IDA NEWS RELEASE NO. 81/27 SENEGAL TO RECEIVE $30 MILLION LOAN FROM THE WORLD BANK AND SDR 22.9 MILLION ($30 MILLION) FROM IDA FOR STRUCTURAL ADJUSTMENT The Government of Senegal will receive support from the World Bank and the International Development Association (IDA) for a program of structural adjustment covering a five-year period ending June 30, 1985. The World Rank has approved a loan of $30 million and IDA a credit of SDR 22.9 million ($30 million) for the program. IDA is the soft-loan affiliate of the World Bank. This is the first time that the World Bank has provided this type of assistance to a West African nation since it began a new form of program lending to help developing countries adjust to permanent or long-term changes in the international economic environment. Two factors, both outside Senegal's control--bad crop years in 1977/78 and 1979/80, and the oil price increases in 1979--combined to create an unfavo- rable balance of payments position and made the need for structural adjustment acute. ~ In December 1979, the government launched the Economic and Financial Recovery Program, of which some important measures are already being implemented. The loan and credit will support the implementation of this program, the main objectives of which are~ to stabilize the economy--particularly by reducing the gap in the balance of payments--to stimulate growth, and to reduce the in- equalities between urban and rural incomes. The first two to three years of the program will focus on the stabilization objective, after which time it is expected that the economy will resume a stea<lie1 growth pace. In order to realize the objectives of the comprehensive structural adjustment program, the government took action in four interrelated areas: fiscal and monetary; prices and incentives; public investment; and the parapublic sector, primarily in agriculture. The first set of measures aims principally at economic stabilization through containing aggregate demand, and reducing the share in GDP of private and public consumption. The other measures focus mainly on increasing supply, while new pricing policies and the reform of agricultural institutions are also expected to lead eventually to a shift of income towards the rural population. The loan and credit which are complementary to exceptional aid from other sources will be disbursed in two tranches. The first tranche of ~40 million will be available for disbursement after the loan has been declared effective, and the second, after a performance review scheduled to be held before March 31, 1981. The World Bank loan is for a term of 20 years, including five years of grace, ~ i t h interest at 9.25% per annum. The IDA credit has a term of 50 years, including 10 years of grace. It carries no interest, but will bear a service charge of 3/4 of 1% per annum to cover administrative expenses. NOTE: IDA credits are denominated in SDRs (Special Drawing Rignts), which are valued on the basis of a "basket" of currencies. The U.S. do.llar equivalent of the SDR amount of the IDA credit reflects the exchange rates existing at the time of negotiation of the credit.